Aetrium Urges Shareholders to Reject Proposed Board Takeover

A group of investors seeks to take control of Aetrium’s board; at a special meeting scheduled for later this month, the company is urging shareholders to vote against the proposed removal of its existing board.

With a special shareholder meeting scheduled to occur later this month, North St. Paul-based Aetrium, Inc., is urging its shareholders to reject an investor group’s attempt to take control of its board.

Aetrium announced Monday that Glass, Lewis & Company, an independent proxy advisory firm, has recommended that the company’s shareholders reject a takeover attempt by an investor group led by Jeffrey Eberwein. The firm concluded that the group’s “lack of a stated strategic plan and inexperience in the industry would risk creating uncertainty at Aetrium that could lead to instability,” Aetrium said.

“We are extremely pleased that Glass Lewis has recommended against removal of our qualified and experienced directors,” the company said in a statement. “Glass Lewis recognizes that turning over control of Aetrium to the dissidents is not in our shareholders’ best interests.”

News surfaced in September that an investor group calling itself “Concerned Aetrium Shareholders” had formed “to seek to join the board of directors, study the business, and take other, yet-to-be-determined, actions to maximize shareholder value.” At the group’s request, Aetrium called for a special shareholder meeting on November 26.

The group says it owns more than 17 percent of Aetrium’s shares, making it the largest shareholder. The group claims that a change in leadership is necessary due to the board’s “inability to halt the steep share price decline, poor financial performance, excessive compensation, failed succession planning, and poor corporate governance.”

In 2011, Aetrium, which makes equipment used by the semiconductor industry, recorded a $4.7 million net loss on revenue totaling $9 million—down 45 percent from the previous year. Net sales for the first six months of 2012, meanwhile, totaled $3.9 million, down 25 percent from the same period last year; the company recorded a $1.1 million net loss for the period.

In a recent letter to shareholders, CEO Joseph Levesque said that demand for semiconductors has been “severely depressed” since 2008, and the impact on semiconductor equipment companies has been “crippling.” Industry forecasters are predicting a rebound beginning in the second half of 2013, and the company continues to work to expand its customer base, Levesque said.

He urged shareholders to reject the proposed board takeover, saying that the investor group “has no experience in the semiconductor equipment industry or the semiconductor industry that we serve, and they have no strategic plan for moving forward.”

The group’s plan for the company “reads like the table of contents to a first-year business class textbook, contains about as much content, and fully demonstrates the Eberwein group’s lack of knowledge of our company, our products, and our customers,” he added.

Levesque refuted accusations that the company’s leaders are overpaid; for example, he said that his $280,000 annual salary was set in 2007 and is “consistent with industry norms,” and he’s been voluntarily working under a reduced salary of $140,000 this year.

Aetrium previously said that it offered the investor group one seat on its six-member board, but that offer was rejected. Levesque said in his latest letter that the company offered the group four seats on a 10-member board, but the group “has not wavered from its demand for complete control of our board.”

To read Levesque’s full letter, click here.

The investor group said in a filing with the U.S. Securities and Exchange Commission that the offer for four board seats was given “only hours” before the company filed its proxy, and although the group was not given sufficient time to consider or respond to the offer, it has “reluctantly concluded” that a complete change in the board’s composition is “necessary to maximize shareholder value.”

The group said that it will consider a number of strategies to enhance shareholder value, including a reverse stock split to ensure adherence to Nasdaq listing requirements, a diversification of the company’s customer base, improved inventory management, and a search for buyers for the company’s “excessive product inventory.”

Aetrium, founded in 1983, is one of Minnesota’s smaller public companies; it would not rank among the 100 largest based on its 2011 revenue.